Fed Chair Front-Runner Kohn Spoke Up About 'The Taper' After The Jobs Report

Donald Kohn and Ben Bernanke at the 2010 Jackson Hole Economic Symposium in Grand Teton National Park
REUTERS/Price Chambers
Ben Bernanke is expected to retire when his term as Federal Reserve Chairman ends this year.

Economists believe that the vacated seat will likely go to either current Vice Chair Janet Yellen or former Treasury Secretary Larry Summers.

...How much the FOMC might be swayed by that swing is hard to say. For their Sept. 17-18 confab, they'll have to go with the August jobs report, which was not good, former Fed Vice Chairman Donald Kohn told Greg Valliere, chief political strategist at the Potomac Research Group. Kohn still expects the FOMC to begin gently tapering its asset purchases, but adds that the odds of that happening has shifted, to perhaps 60-40 from 80-20 a few days ago, according to a research note published after the jobs numbers' release.

Given that the August employment report "wasn't a disaster," the Fed is likely to go ahead with the taper because it was "pre-announced," Kohn continued. Bernanke broached the idea of trimming the securities purchases in late May and laid out a tentative timetable after the June FOMC meeting -- contingent upon economic data improving in line with its forecast. Had the Fed not pre-committed, "they might wait until they see whether the economy and labor markets are indeed strengthening as expected," Kohn added.

But the central bank has tied the end of quantitative easing to a 7% jobless rate, "and even if it's for the wrong reason, they're getting closer to that," Kohn continued...